RBI Surplus Contracts Indias Fiscal Deficit To 3% Of FY25 Target In April-May

The Union government’s fiscal deficit was curtailed to 3% of the budgetary target at the end of the first two months of the financial year-ending March 2025.

The gap between expenditure and revenue during April-May stood at Rs 50,615 crore of the total limit set at Rs 16.85 lakh crore for the ongoing fiscal, according to provisional data released on Friday by the Controller General of Accounts.

The fiscal deficit figure follows a sharp contraction of Rs 1.59 lakh crore in May, owing to the surplus Reserve Bank of India dividend, reducing the deficit from Rs 2.1 lakh crore at the end of April.

The first two months also witnessed a diminished capex momentum, compared to a positive one at the same time last year, with the capital expenditure spend reaching 13% or Rs 1.43 lakh crore out of the budgetary target of Rs 11.11 lakh crore.

The slower uptake in capex was likely due to the temporary pause in execution amid the Model Code of Conduct, according to Aditi Nayar, chief economist at ICRA Ltd.

“The revenue upside seen from non-tax (sources), and to a smaller extent the tax receipts suggests headroom to both boost expenditure and target a faster fiscal consolidation than what was pencilled into the Interim Budget for FY25,” she said.

ICRA expects nominal GDP to rise by 10.8% in FY25, only slightly lower than the imputed growth of 11% in the interim budget over the provisional estimates for FY24.